Trading the ES Helpful Tips

By Chris on 2011-03-26 in E-mini Trading (0) Comments

Trading the ES

When it comes to emini futures you should be aware of the S&P500. It may behoove you to get an idea of what it means to be "trading the es". This may be in my assessment the best vehicle to begin your trading career. We've talked about understanding volume in the past. Though not always in the "trading" sense, we want to have some understanding of volume.

"Its important to not overcomplicate anything you do and this includes the Emini S&P 500 futures"

The ES futures will provide the most in terms of volume and ease of trade(reference to getting in and out - not success). More volume will always equate to the ability to enter and exit a trade at your desired price. Generally speaking, volume within the S&P 500 e-mini futures will be enough for you to make your trade. This is important to understand and recognize. If no one else is involved in the market you're looking to trade, you may get taken advantage of. Not by anyone in particular, but by the very idea that in order for you to enter and exit, their must be someone else on the other side.

Point Value - Previous and Future Market Correlations

The point value for the ES, as discussed in previous posts is $50. The Russell futures which has a point value of $100 is no doubt more attractive, but it also hurts much more if you lose a trade. We must understand that chasing "point value" can lead to problems. So I want to make that clear before I continue. Point value doesn't mean success and can in some cases be more of a problem than it can help. There is no shame in trading an instrument that is not as flashy like the S&P 500. If you can do it then why not take advantage of it?

This of course is more evident in the beginning of a trading career. So look at the beginning of your career and how you would like to approach your path to success. The reason I bring this up is pretty simple. A lot of what I do within the Russell Futures market is determined by what I believe the S&P e-mini market may do next. Though this is becoming less and less the case, I still gain my overall sentiment from the S&P. It's a market I feel acts within a more structured environment. Though there are plenty of outlier days I find I can spot sooner, opportunities within this market than others. The amount I may be able to grab from this trade may be less than other markets, but I know I can always get back to this market to get my bearings back.

It may still be of value to begin by practicing your trend lines, analysis and understanding while trading the ES. In fact their have been times in the past where I would trade gold as well as oil off of my e-mini S&P analysis. Looking to see if their is a correlation between the market I'm most confident in and the market I'd like to participate in. So it's important that you can and are willing to become very familiar with this instruments characteristics in particular. Have something you can bank on, but remember you're always guessing.

Trading the ES with Trend Lines

Trend lines are a big part of my trading and are of up most importance when determining structured exit areas. When learning to develop and implement trend lines into your futures trading, remember that your trade is only as solid as the opposite trend line attached to your entry. When trading the ES or any market for that matter, make sure you have some idea of where you want to begin to lock in profits.

Maybe it's a good idea to implement trend lines as only a way to exit and something that's not relevant within your entry strategy. Whatever the case, include some relevant trend lines weekly, daily or hourly. Understand the trend! Use trend lines to stay involved.

Remember, Greed is Bad When Trading The ES

What do I mean by this? It comes down to the same old adage that I'm sure you've heard a million times before - "Don't be too greedy". I may say this is most important when trading the emini S&P futures, but it is just as important for any other instrument.

Instead of looking for 40 ticks in the ES, I may look for a maximum of 12-16 ticks in before I can begin to lock in profits. The ES just isn't going to give me 40 ticks within my trade horizon very often. Of course we know by now that I'm not a fan of exiting a trade with a limit target order, but rather I bring my stop up to lock in profits. This allows the market to take me out rather than me limit what the market wants to give me.

This is important in the /ES as typically you're not looking for 30-40 ticks. Your looking for the few ticks this instrument is willing to give up. So be quick with your action once you've made your decision to begin to lock in using your stop. Be aware of the moment we've started to reach the limits of a typical ES move.

What to Expect in My ES Trading

So to make clear what I'm trying to say here let's wrap up. If you're just starting out within your emini trading career its probably a good idea to get your feet wet within the emini S&P futures or micro futures. Use these instruments while you're perfecting your craft.

After you've developed some understanding of your own style, venture into other trading instruments. Remember that my most important tools are the trend lines I use to exit trades as well as various support and resistance levels. You can trade along with me in the trade room where chances are I'll be trading the Russell futures. This doesn't mean you need to begin there. Remember what I said about how I approach my own analysis. The S&P is the basis for a lot of what I do and their is no shame in trading the ES. It's up to you!

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FULL RISK DISCLOSURE: Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

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